Grant Thornton cuts Parmalat ties

THE Parmalat scandal has taken a fresh turn with embattled auditor Grant Thornton International cutting loose the Italian unit embroiled in the affair.

Its global network has now severed all connections with the affiliate to protect its reputation in the wake of the accounting crisis at the Italian food giant.

Though not unprecedented, the unusually swift move reflects Grant Thornton's frustration following its failed efforts to glean information from the Italian operation.

'The damage to our reputation if we allowed it to go on would be too great,' global chief executive David McDonnell told reporters.

'Frankly, we have not been able to have sufficient access to information or people to enable us to restore sufficient confidence . . . it was just taking far too long.'

Until last week, the firm had been defending the Italian group and even launched a legal action against an Italian newspaper for suggesting it was under investigation for its role in the alleged e11bn (£7.6bn) fraud at Parmalat. The affiliate, Grant Thornton (Italy), audited some Parmalat subsidiaries, including Bonlat, a Cayman Islands-based unit that reported a fictitious e3.95bn bank account on its books and brought the scandal to a head.

Magistrates have accused Grant Thornton of co-operating in and devising the scandal at Parmalat, and its former chairman and senior partner were arrested by Italian police last week. The accounting firm later suspended the two executives.

Italian prosecutors have, meanwhile, widened a fraud investigation to take in two auditors from Deloitte - the company's main auditor - and former Bank of America executive Luca Sala, who worked for Parmalat as a consultant.

Magistrates in Milan put two partners of the Italian affiliate of Deloitte & Touche - Giuseppe Rovelli and Adolfo Mamoli - under investigation.

Deloitte denies it did not make thorough checks into the company.

Luxembourg authorities have also weighed in to the investigation by looking into possible money laundering after banks reported what they regarded as suspicious transactions linked to Parmalat.

'It is a major case. It is not a small file,' Carlos Zeyen, head of the financial intelligence unit in the Luxembourg prosecutors' office, told reporters.